Reeves: Interest rates hike “incredibly worrying” for struggling households

Rachel Reeves has declared that the latest rise in interest rates will be “incredibly worrying” for already struggling households and argued that the responsibility for the “crisis” lies “at the door of the Conservatives”.

The Bank of England announced this afternoon that it was raising interest rates for a 14th consecutive time, from 5% to 5.25%, as part of efforts to tackle high inflation and ease the cost-of-living crisis.

Commenting on the latest increase in borrowing costs, the Shadow Chancellor said: “This latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.

“The Tory mortgage bombshell is hitting families hard, with a typical mortgage holder now paying an extra £220 a month when they go to re-mortgage.

“Responsibility for this crisis lies at the door of the Conservatives that crashed the economy and left working people worse off, with higher mortgages, higher food bills and higher taxes.

“After 13 years of economic failure and managed decline under the Conservatives, it’s time for change. Labour’s plan to build a strong economy will boost growth, increase wages and bring down bills.”

Chancellor Jeremy Hunt said: “If we stick to the plan, the Bank forecasts inflation will be below 3% in a year’s time without the economy falling into a recession. But that doesn’t mean it’s easy for families facing higher mortgage bills, so we will continue to do what we can to help households.”

It was expected that the Bank would again hike interest rates today, having taken the somewhat surprise move in June to raise rates half a percentage point to 5%. The rate of inflation fell more than expected in June to 7.9%, which eased forecasts for how much the Bank would raise interest rates in the coming months.

Speaking on Wednesday, TUC general secretary Paul Nowak urged the government to “stop hiding behind” the Bank and “come up with a credible plan for boosting jobs and living standards”, warning that a further increase in interest rates would “put many thousands more jobs and livelihoods at risk”.

Responding to today’s increase, Nowak accused the government of “flirting with a recession” and argued that a further hike is the “last thing working people need in the middle of a cost-of-living crisis”

The union leader added: “The government needs to deliver strong, shared growth, rather than an economy that is stagnating or shrinking. Make no mistake. The Chancellor is sitting on his hands while the economy runs into a wall and it will be working people who pay the price.”

Also commenting on the Bank’s announcement, senior economist at the Institute for Public Policy Research Carsten Jung argued that the Bank is “overdoing it”.

He said: “By raising interest rates to 5.25%, the Bank is tightening the screws too much and causing excessive harm for households and businesses.

“Interest rates might well be more than a percentage point too high now. Instead of further rate rises, we need a more balanced approach to tackling inflation, using more government support.”